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C 5700.3 P959s 1989 c. 1
PRISON SITE SELECTIONTASKFORCE
FINAL REroRT
2./10 t I'
Task Force Members:
Dr. Don S. Udell, Chainnan
Samuel G. Chapnan
Vernon K. Davis, P.E.
Robert Holloway
Stan Provus
PRISC»l SITE SELECTION TASK FORCE
FINAL R.EroRT
Task Force Members:
Dr. Don S. Udell, Chairman
Samuel G. Chapnan
Vernon K. Davis, P.B.
Robert Holloway .
Stan Provus
PRISON SITE SEIECrION TASK FORCE
FINAL REroRl'
TABIE OF CX>Nl'ENrS
INrROIlJCrION
Definition of the Problem
Creation of the Task Force
'!HE REVIEW POOCESS
Public Meetinqs
SUbcommittee Reports
<X>NCIIJSIONAND ~ONS
suproRl'ING MATERIAL
Appen:lix A - Figures 1 am 2
Appen:lix B - Senate Bill 2
ApperxliX C - SUbcommittee Reports
Appen:lix D - Meetinq Agen:3as am Minutes
Appen:lix E - other Community Proposals
'!his report represents the final recanunerrlationsof the Prison site
Selection Task Force. '!he task force, chaired by Dr. DonS. Udell,
Associate Professor of Educational Leadership an:! Policy studies,
University of Oklahoma,was established in November, 1988 by the Oklaho-na
D:parbnent of Corrections. Members of the task force include:
SamuelG. Olapman,Professor of Political Science, University of Oklaho-ma;
Vernon K. Davis, P.E., Administrator, construction & Properties
Division, state of OklahomaOffice of Public Affairs; Robert Holloway,
Assistant Professor of Crilninal Justice, cameronuniversity; and stan
Provus, state Born.Advisor, state of OklahomaExecutive & Legislative
Born.OVersightCommissions.
In developing these recarnmerrlationsthe task force relied on
several sources of info:nnation: public testwny, written testwny,
staff research, and members'personal experience and expertise. (Com-plete
doctnnentationcan be fourrl in the apperxlices. It should be noted
that the order in whichthe sites are presented is not meantto suggest
their relative importanceor priority for action.) The task force was
supportedby staff of the OklahomaJ)epartnEltof Corrections.
Definition of the Problem
The legislature and the Pardonand Parole Boardshould be conunended
for recent and past efforts to ease prison crowding. For example,
Conununityservice Sentencing and Pre-Parole Corrlitional SUpervisionare
programsimplementedlast year whichdecrease receptions into prison and
increase releases fran prison, respectively. However, crowding in
prison continues to be a critical concern for the state of Oklahoma. In
Augustof 1988 GovernorBellIlDncalled' a special session of the state
legislature to deal with the prison problem. At that time Senate Bill 2
directed the OklahomaJ)epartnElt of Corrections to take immediate
actions by considering plans for the expansfon of mediumand maximum
security bed space at the Oklahomastate Penitentiary at McAlesterand
construction of a min.imunVne:limsencurity prison to be located at
Hinton.
The prison population has nore than doubled over the last ten
years, grc1Ningfran 4300 in 1979 to over 10,500 today. Oklahomahas
respondedto this problem, in part, by exparxlingcapacity. In addition,
Oklahomahas implementedan energencyrelease act (the "cap" law) and
has encouragedthe use of alternatives to incarceration. Nevertheless,
the prison systemtoday has nearly 1400 iInnatesover capacity. Figure 1
(AppendixA) showsprojected crowdingby security level at the ern. of
calerrlar year 1998: 1) urder current policy (i.e., the "cap" law is in
effect); and 2) assuming"cap" were not in effect. ,Figure 2 (Appendix
A) presents iInnatepopulation projections with and without "cap."
Prison population growthhas been a persistent problem. Although
various prograns have been implementedto control growth, the task force
foresees prison population grcMln:Jfor many years to came unless
significant action is taken by the Oklahanalegislature.
capacity expansdon is one option that should be seriously
considered. Because the greatest bed space shortages are and will
Prison site selection TaskForce Final Report
February 13, 1989
Page2
continue to be in maximum am IOOdiumsecurity facilities, am because
they take at least two to three years to build, highest priority should
be given to exparrlirg the higher security levels.
Creation of the Task Force
Senate Bill 2 directed the Oklahorra ~t of Correctionsto
study the expansionof prison facilities at lwt:Al.ester ard Hinton. '!he
Oklahona~partment of Corrections, in order to obtain an inunediateand
unbiased evaluation of the two sites, naned an "external," task force.
'!he Prison site Selection Task Force was established in November1988.
'!he Prison site Selection Task Force was given the charge of
con:iucting a feasibility study for expansion of medimnam maximum
security bed space at the Oklahomastate Penitenticu:y at McAlester am
constnlction of a nri.nilnunVmedimsencurity prison to be lcx:::atedat
Hinton. '!he scope of the task force marrlate was limited to
consideration of: 1) state operated prisons only (in contrast to
privately operated facilities); 2) the cost of facilities; am 3)
financing, to include present value analysis. '!he task force was
directed to look at Hinton am McAlester sites first; however, other
interested conum.mitieswere invited to submit relevant infonnation to
the task force.
'!HERE.'V]Eq. PRCX:::ESS
On November28, 1988, the task force had its organizational meet-ing.
'!he task force agreed to review infonnation to include: geographic
distribution of current facilities am security levels; fiscal am
historical infonnation; site starrlards (ACA,etc.); facility organiza-tional
stnlcture; prison population projections; am other relevant
infonnation provided by the OklahomaDeparbnent of Corrections. In
addition, the task force agreed to hold three site review m:etings.
site ReviewMeetings
'!he first meeting was held on December12, 1988 in Hinton, Oklaho-ma,
while the:secon:i m:eting was held on December14, 1988 in McAlester,
Oklahoma. EaCh of these m:etings was held following a tour of the
proposed prison site am a tour of the town. At each lcx:::ationthe task
force memberslistened to statem:mts fram irrli viduals who supported or
opposedplacem=ntof a prison facility in their c::cmm.mityA.n invitation
was exterxied for anyonewishing to makea written statem:mt to the task
force to do so in care of the OklahomaDepartmentof Corrections.
A third m:eting was held on January 10, 1Q89 at the Oklahoma
Deparbnentof Corrections administration builclinJ in Oklahomacity. '!he
purpose of the third m:eting was to provide an opportunity for other
interested parties to be heard am present supporting infonnation.
Representatives fram Beaver, Cl.1shin:J am Helena were present, am all
expressed interest in having a prison facility lcx:::ated in their
c::cmm.mities. In addition, persons fram Hinton spoke both for am
against their city as the site. Most had not spoken at the December
12th m:eting.
Prison site Selection Task Force Final Report
February 13, 1989
Page 3
SUbcommittee RepOrts
On January 13, 1989 the Prison site Selection Task Force ret to
discuss its fi.rrlirxJs am evaluative criteria am the fonrat am struc-ture
of the final report. At this reetin:j two subcc:mnittees were
created. Each was to prepare a subcc:mnittee report sunurarizing its
firxiID;Js am judging the feasibility of establishing a prison at either
or both locations.
On January 27, 1989 the Prison site Selection Task Force ret to
discuss the subcarmni.ttee reports. '!he fo11owin:] matrix presents the
fi.rrlin:Js of the subcarmni.tteeswith respect to the evaluative criteria.
Copies of the full reports are included in Apperrlix C.
IHYSICAALNDFISCAL<DNSIDERATIOSUNI3CSX:MvIT'ITE REroRl' FINDINGS
CRITERIA/FAcroRS
Accessibility
Terrain
Water
Electricity ani gas
Sewagetreatment
Time to construct
Disadvantages
Borrl Issuance
Good
Good
Good
Noproblem
A I1eINsewage lagoon
will be required
Up to 8 months can be
saved.
Noneobserved
Feasible
Good
Good
Good
Noproblem
A new sewage lagoon
will be required
Noneobserved
Feasible
SOCIALANDAIMINISTRATI<VDENSIDERATIOstJNI3CSXl.1MITTE REroRl' FINDINGS
CRITERIA/FAcroRS
Available Labor Force
Social Climate
Social IIrpact
(Assilnilation of staff)
support; Services
Administrative
considerations
HINroN
Adequate
Questionable
Slower
Adequate
Good
Adequate
Good
Faster
Adequate
Good
Prison site Selection Task Force Final Report
February 13, 1989
Page 4
Prisons in Oklahooacontinue to beccme rrore CIUtrled, ard prcx:JIOIl1S
designed to reverse the trerrl have not been effective. Even the "cap"
law has not stopped prison ~ation gmvth. rrbe prison population is
currently 1500 irnnates over the 95% capacity level, the threshold for
awarctirg energency time credits.
Although all security levels are projected to be oveI'CI'ClY.tbieydthe
errl of 1998, the ITOSt serious problem is in maximumand mediumsecurity
facilities. '!he task force believes at least one mediumsecurity prison
should be funded this year so that construction can begin as soon as
possible.
After hearing testilrony fram representatives fram Hinton and
McAlester and evaluating both CXJIl1l'ClI.lIo1ntiesseveral factors, the task
force has determined that both sites are adequate for prison construc-tion
and operation. '!he only concern the task force has is in regard to
the social illlpact a large institution mayhave on Hinton. Deparbnent of
Corrections employees could be assimilated faster at McAlester than
Hinton because McAlester is a mudl larger CXJIl1l'ClI.lIo1nty.the plus side
for Hinton, however, is the town's association with a large construction
conglomerate whidl is ready to fund and build a prison for lease-purchase
to the state. 'Ibis would allow the state to acquire additional
capacity up to eight months faster than if it followed the traditional
rrethod for prison construction.
'!he task force also looked at financing prison construction through
a bond issuance. 'Ibis type of financing should be further studied by
the Office of state Finance and the legislature. It would be feasible
to finance prison construction through bonds at both sites.
In conclusion, the task force recarnrnerrls the following actions for
the state of Oklahoma:
1) F'L1rrl at least one rrediumsecurity prison for inutmiate construction,
to be located at either Hinton or McAlester.
2) Develop a camprehensive construction plan to address the increasing
prison crowding projected through 1998, especially with regard to the
higher security levels.
3) Study in depth both bond financing and lease-purchase al ternati ves
to traditional rrethods of capital financing and construction.
Prison Site Selection Task Force
Final Report Signature Page
j.~~ Don S. Udell, Chairman
5,-.12 ,-. ~~ •..--"'".-==-'~
Samuel G. Chapman
Vernon K. Davis
Stan Provus
AppeIrlix A
Figure 1
OVERCROWDING PROJECTION. END OF 1998 NUMBER OF INMATES OVER CAPACITY WITH AND WITHOUT 'CAP' LAW ACTIVE
7000
TAWODITDTA'HLLCAWWIPIOTHCOAUPT CAP ~
6000 .>-- •.....u<0
.. L3 5000
Noo
.-.
0:: 4000 w>o
(J) w!< 3000 ::E:
Z•.....
u,
0w0::2000
CD ::E:
:::::>
z 1000
O...L..--..J
325337207318
TOTAL
258239257
MAXIMUM
11052526
2578
MEDIUM
820
807
1627
MINIMUM
422 251
673
COMMUNITY
Figure 2
14000-
13500-
13000-
12500-
If<D-: 12000-
:E z•.....
LoL 11500-
0w::: rn :E 11000- =z>
10500-
10000-
9500-
OKLAHOMA DEPARTMENT OF CORRECTIONS TOTAL SYSTEM POPULATION PROJECTIONS WITH AND WITHOUT CAP
PROJECTED
DIFFERENCE BETWEEN
CAP AND NO CAP
RX><X>4
ACTUAL
TOTAL SYSTEM
POPULATION
--~ XXX>c
~
~
~XXXXXXXXX>c
.,. O:XXXXXXXXXXXXXX>c
>c
XXXXXXXAA.AXXXX>C
.A.xXXX>C
XXXXXXXXXXXXXX>C
X.JC
xx-XY)C
WITHOUT CAP XXXXXXXXXXXXX>C
A.A.XXX>C
Xx..X~
9000.- I I I I I I I I I I I I I I I I I I I I I I I
6/87 6/88 6/89 6/90 6/91 6/92 6/93 6/94 6/95 6/96 6/97 6/98
12/87 12/88 12/89 12/90 12/91 12/92 12/93 12/94 12/95 12/96 12/98 12/98
IR
WITH CAP
Appenlix B
1 the Oklahoma Statutes:
Budgetary Limitation
Full-time-equivalent Employees
Amount
iht
29.0
Payroll, Salaries or Wages, Including Tax-sheltered
Deferment Contracts and Longevity Payments
Authorized by State Statutes $6961495T98
$116,175.00
Professional and Personal Services Contracts $0.00
Purchase of Equipment $i6J49hee
$27,300.00
Expenditure of Federal Funds $0.00
Total Expenditures for Operations 'hUSTUhee
$1,045,365.00
SECTION 13. There will be
SECTION 14. There is hereby appropriated to the Department of
Buman Services from any monies not otherwise appropriated froa the
Speci.l Cash Fund of the State Treasury the sum of Three Bundred
Seventy Thousand Dollars ($370.000.00) or so much thereof as aay be
necessary for youth services programs and shelter ••
SECTION 15. There is hereby appropriated to the Department of
Buman Services from any monies not otherwise appropriated from the
Special cash Fund of the State Treasury the sum of Three Bundred One
Thousand Thirty-four Dollars ($301,034.00) or so much thereof as may
be necessary for capital construction at the juvenile detention
centers in Muskogee and Enid.
SECTION 16. AMENDATORY Section 3 of Enrolled Bouse Bill
No. 1567 of the 2nd Session of the 41st Oklahoma Legislature, is
amended to read as follows:
Section 3. It is the intent ~f the Legislature that the funds
appropriated to the Department of Buman Services in Sections 1 and 2
of Enrolh·d House Bill No. 1567 of the 2nd Session of the 41st
Oklahoma Legislature and Section 14 of this act shall be expended in
the following amounts and categories:
1. Services to Children and Youth $ 48,721,197.00
th3ih38io99
8,681,382.00
2. Oklahoma youth Services Agencies
3. Services to the Mentally Retarded
and Developmentally Disabled
4. Rehabilitative and Visual Services
22,300,652.00
8,721,908.00
5. School for the Blind 3,459,314.00
6. Services for the Deaf and
ENGR. S. B. NO. 2 (3R~ EXTRAORDINARY SESSION) Page 9
Apperrlix c
FHYSlCAL AND FISCAL CDNSIDERATIONS SlJBCXlv1MITI'E REroRr
January 27, 1989
FHYSlCAL CRITERIA
Accessibility
Terrain
Water
Electricity am
gas
SewageTreatment
Time to construct;
Disadvantages
Bondissuance
FHYSlCAL CDNSIDERATIONS
EVAIDATION MATRIX
HINION
Good. Close to I-40
on US-281. The location can
provide enoughdistance
between the highwayard the
site for a security buffer.
Good. Rolling terrain with
the main site located on
the top of a large flat
area. A square mile of
lam has been identified
as being included, all of
whidl can be well utilized
by a prison.
Good. Nine water wells
are on the site whidl may
be developed for use as a
water supply. All reports
irrlicate that there is a
plentiful supply.
Noproblem.
A newsewage lagoon will
be required.
16 to 18 months, A
constnlction conglomerate
is ready to finance am
build a prison for lease to
the state. Upto 8 months
can be saved.
NoneobseIved.
Feasible.
Good. Near US-270 on
existin;J prison
grourxls.
Good. Gently sloping
terrain just south of
the old women'sunit
on the grourxls of OSP.
Good. water is
supplied from the City
of McAlester whidl has
assured us that their
newplant can easily
absorb the expansion.
Noproblem.
A new sewage lagoon
will be required.
24 to 36 months.
Noneobsel:ved.
Feasible.
In surranary, with regard to such factors as accessibility, the
terrain, am utility availabilitity, both sites would meet the
requirements the Department of corrections is likely to have for the
types of prisons considered for these two sites.
FISCAL (X)NSIDERATIONS
See attached treJt¥:) fran stan Provus the state borrl advisor, regard-in1
bond financin1 of prisons.
State of Oklaho ma
EXECUTIVE AND LEGISLATIVE
BOND OVERSIGHT COMMISSIONS
104 State Capitol Building
Oklahoma City, Oklahoma 73105
405/521-2121
Stan Provus
State Bond Advisor
MEMORANDUM
TO: Cliff Sandel, Deputy Director
Administrative Services
Department of Corrections
Stan Provus -Ie f/
State Bond Advisor
~ ~~3k1U'~~~~@
FROM: OlVIS:ON Of ADMINISTRATION
DATE: January 30, 1989
SUBJECT: Bond Financing of Prisons
Bond financing is the preferable funding alternative for new
prisons. Bond financing brings about intergenerational equity in
paying for oapital assets with long useful lives like prisons.
Moreover, it would actually be less expensive for the State to
bond for prisons than pay cash, assuming the cash were available.
Under current market conditions, these savings would total about
$3.1 million dollars on a $30 million dollar prison. Various
aspects of a bonded approach to financing prison(s) are
considered below.
I. Type of Bond
Tax-exempt revenue bonds or Certificates of Participation
Bonds would be secured by lease payments from the Department of
Corrections. Once all lease payments are made, the facility
would revert to State ownership (sometimes ownership can be
transferred at origination). The Department of Corrections would
be required to request annual appropriations to make lease
payments. Because annual lease payments represent annual
operating expenses contingent on appropriations, the financing
would not represent "debt" for constitutional purposes nor be
subject to voter approval.
There is about $33 million of public sale, lease rental bond
debt outstanding in Oklahoma for which the State is responsible.
It is being used to finance both real property and equipment for
a number of State agencies ranging from the Department of Human
Services to the State Finance office. All such issues have been
rated "A" by Moody's, without credit enhancement. A prison issue
could expect a similar rating without credit enhancement.
II. Estimate of Annual Debt Service Cost
Assumptions: - $30 million principal amount
- 20 year term
- "A" rated bond issue
- 7.6% Net Interest Cost under current
conditions
A. Monthly payment: $243,515
B. Annual payment: $2,922,187
This debt service cost estimate is reasonable under current
market conditions. The McAlester Industrial Development
Authority term sheet contemplates an "insured" offering sold
through "competitive bid". The question of who should issue the
bonds is considered below. There are several issues that need to
be considered to establish whether an "insured" offering is
cost-effective and, secondly, whether a competitive versus
negotiated offering makes sense. These issues are
inter-dependent.
Bond insurance is a form of "credit enhancement" or
substitution and simply involves an issuer's purchase of outside
support for a bond issue which substitutes for an issuer's own
credit on a particular bond issue. The credit substitute
provides protection to bondholders, even in the event of issuer
default. The issue is, therefore, assigned a rating reflecting
the insurer's (bank letter of credit, bond insurer, etc.) own
debt rating.
A municipal bond insurance policy is a non-cancellable
guarantee to make timely debt service payments, if the issuer
does not. There are a number of companies providing insurance on
municipal bonds (AMBAC, BIC, MBIA, FGIC). Insured bonds today
account for about 30% of new issue volume.
On an Oklahoma prison issue, bond insurance could be
expected to improve the rating from "A" to "AM" and thereby
permit accessing the market at lower interest rates. An issue
rated "AM" rated issue would likely sell at an NIC rate of 7.3%
versus the 7.6% rate noted above for an "A" rated issue~ Under
current market conditions, if the annual cost of the insurance
premium was less than 30 basis points (100 basis points=l%), an
"insured" approach would be cost-effective. If higher than 30
basis points, it would not be cost-effective. The
cost-effectiveness of bond insurance can only be established once
Page 2
quotes are received from insurers and measured against interest
rate savings under prevailing market conditions (spreads between
A and AAA-rated issues vary) •
If cost-effective, a bond insured issue would likely achieve
the most aggressive pricing though a "competitive" sale.
Generally speaking, an issuer achieves the best rates through
competitive sale on "plain vanilla", general obligation backed
bond issues. Most revenue bonds are sold through "negotiated"
sales, since there is usually more of a "story bond' element to
them and a negotiated sale permits pre-marketing of an issue to
minimize this handicap. Bond insurance acts to eliminate the
"story" element because the bond buyer really looks to the
AAA-rated credit of the insurer. Thus, the question of insured
versus uninsured and competitive versus negotiated sale will rest
with the determination of the cost-effectiveness of bond
insurance near the time of sale.
III. Who should issue the Bonds?
Industrial Development Authorities at both sites have
offered to act as the bond issuer. It should be understood that
both would act as conduits for the financing and assume no risk
on the bond issue(s). The "credit" is the State, regardless of
who issues the bonds. Serious consideration should be given to
issuing any such bonds through the Oklahoma Development Finance
Authority or Capital Improvement Authority, since their bonds
would carry a "double exemption" in contrast to the "single"
exemption available through the local issuing authorities.
"Double" exemption means the bonds are exempt from both State and
federal taxation; single means federal only. A double-exempt
bond sold primarily to Oklahoma buyers would likely be priced
about 8-10 basis points lower. This would lower annual debt
service by $22,000 per year or save $441,000 over the life of the
issue (present value savings of $274,000 and $188,000 at 5% and
10% discount rates respectively).
IV. Cash Versus Bonding Cost Effectiveness
Perhaps the economist's most often quoted dictum is: "There
is no such thing as a free lunch." The cost of a resource, State
appropriations in this instance to pay cash for a prison, is
therefore, the value of that resource in its best alternative
use, or more broadly, the cost of any decision is the value of
the best alternative opportunity thereby forsaken. This
definition of cost, known as the opportunity cost doctrine, is
probably the economist's major contribution to the practice of
decision-making.
Keeping this principal in mind, the following analysis
demonstrates why it would be cheaper to bond for a prison than
pay cash. The difference or spread between taxable and
Page 3
tax-exempt interest rates drives this analysis. Under current
market conditions, a prison bond could access the tax-exempt
market at about 7.6% (NIC, single-exempt). On the other hand,
the State can invest funds in a highly rated guaranteed
investment contract (GIC) and access a 9.1% taxable rate. This
means the State could invest an amount of money in an escrow at
9.1% and use the escrow to pay principal and interest on a 7.6%
tax-exempt bond. Since the GIC escrow pays interest at a higher
rate than the bond, only $26,873,000 would need to be invested to
meet the monthly debt service payments of $243,515 on the $30
million bond. This would save the State $3,126,000 in current
dollars.
Thus, a bonding approach is more cost-effective than paying
cash, assuming the cash is available. The "best use" of State
funds is this investment approach to support a bond issue or use
of the "cash" for alternative uses such as building up the rainy
day fund. There are some restrictions in the Tax Code that would
limit too direct a relationship between an escrow fund
capitalized with State cash and a bond issue.
SOP:pks
cc: Dr. Don Udell
College of Education
Page 4
SOCIAL AND AIMNISTRATIVE OONSIDERATIONS SUBCX:MvU'lTEE REroRr
January 27, 1989
'lhis subconunitteelookedbeyorrljust the economiciIrpact of estab-lishirxJ
a prison in a cammmity. We looked at the social structure:
what structures mist be there to ensure success, am what changes are
likely to ocx::uras a result of the presence of a large institution. '!he
items we considered included: available labor force, social cl.inate,
social i.Irpact, support services, ani administrative considerations.
Available labor Force
'!he available labor force includes both skilled am unskilled
labor. In Iookinq at the available labor force in the cammmities, we
fim that McAlesteris probably slightly better off than Hinton regani-irq
size of the workforce am perhaps even correctional-related skills
represented. However,there are substantial mnnbers of ready and
willirq workers in both areas.
Social Clinate
Social clinate includes political am citizen attitudes am will.
'!here wasaburrlanttestiloony at both public hearings that both McAlester
am Hinton political leaders support;the establishment of a prison in
their area. In regard to citizen will, samecitizens in Hinton have
certainly voiced their opp::sition, while no opposition to the proposed
expansionwasexpressed fromanyonein McAlester. Withinthe context of
citizen am political will, the subcanunitteemist, identify McAlesteras
apparently nore responsive am more receptive to the proposition than
Hinton.
Social Impact
Social inpact refers to the ability of the canununityto assimilate
corrections personnel, their families, am irnnate families, into the
canununity. OUr feelirq is that the canununityof McAlester,beirq prison
sensitive am experiencedalready, wouldmorelikely assimilate the new
prison families into the canununitywith greater ease than the cxnnmunity
of Hinton. Werealize that Hinton will take necessary steps to make
staff am visitors as welcomeas possible; however,wealso realize that
in a cxnnmunity of the size of Hintonthere maybe sameproblems,partic-ularly
aIOO~those people in the canununitythat have consistently
opposedthe prison. Weare troubled by this, but wedo not consider it
a major barrier.
'!he subcanunitteefelt that the ability of the respective local
school systemsto assimilate the y~ of the correctional families
wasprobably equal.
SUpportServices
Support services include supp::>rttype businesses am service
enterprises. Eachcanununitycurrently has these services in place am
looks fo:t:WcUto'd expansion. Again, McAlester is slightly ahead of
Hinton: however,wedo not see this as a major selection factor.
Administrative Considerations
'!he subcaImnitteelooked at administrative considerations within the
context of the Depart:nEltof Corrections' control. '!he subcommitteedid
not see any difference in the two locales, with one exception. Regard-irg
supply am storage capabilities, M::Alester has a slight edge over
Hinton. '!his difference is not substantial enoughto affect the selec-tion
decision.
SUmrrary
In SUlTIllm'Y, in M:Alester this subcommittee sees a mature, prison
seasoned cannnunitythat is seeking expansion. In Hinton, we see a group
of people whospoke persuasively ani enthusiastically for lcx:::ationof a
prison in their canm.mity. Wehave no reason to believe that is not the
case with manymanypeople in Hinton, but as wein:licated before, weare
just a bit uncertain as to the scale of support.

C 5700.3 P959s 1989 c. 1
PRISON SITE SELECTIONTASKFORCE
FINAL REroRT
2./10 t I'
Task Force Members:
Dr. Don S. Udell, Chainnan
Samuel G. Chapnan
Vernon K. Davis, P.E.
Robert Holloway
Stan Provus
PRISC»l SITE SELECTION TASK FORCE
FINAL R.EroRT
Task Force Members:
Dr. Don S. Udell, Chairman
Samuel G. Chapnan
Vernon K. Davis, P.B.
Robert Holloway .
Stan Provus
PRISON SITE SEIECrION TASK FORCE
FINAL REroRl'
TABIE OF CX>Nl'ENrS
INrROIlJCrION
Definition of the Problem
Creation of the Task Force
'!HE REVIEW POOCESS
Public Meetinqs
SUbcommittee Reports
NCIIJSIONAND ~ONS
suproRl'ING MATERIAL
Appen:lix A - Figures 1 am 2
Appen:lix B - Senate Bill 2
ApperxliX C - SUbcommittee Reports
Appen:lix D - Meetinq Agen:3as am Minutes
Appen:lix E - other Community Proposals
'!his report represents the final recanunerrlationsof the Prison site
Selection Task Force. '!he task force, chaired by Dr. DonS. Udell,
Associate Professor of Educational Leadership an:! Policy studies,
University of Oklahoma,was established in November, 1988 by the Oklaho-na
D:parbnent of Corrections. Members of the task force include:
SamuelG. Olapman,Professor of Political Science, University of Oklaho-ma;
Vernon K. Davis, P.E., Administrator, construction & Properties
Division, state of OklahomaOffice of Public Affairs; Robert Holloway,
Assistant Professor of Crilninal Justice, cameronuniversity; and stan
Provus, state Born.Advisor, state of OklahomaExecutive & Legislative
Born.OVersightCommissions.
In developing these recarnmerrlationsthe task force relied on
several sources of info:nnation: public testwny, written testwny,
staff research, and members'personal experience and expertise. (Com-plete
doctnnentationcan be fourrl in the apperxlices. It should be noted
that the order in whichthe sites are presented is not meantto suggest
their relative importanceor priority for action.) The task force was
supportedby staff of the OklahomaJ)epartnEltof Corrections.
Definition of the Problem
The legislature and the Pardonand Parole Boardshould be conunended
for recent and past efforts to ease prison crowding. For example,
Conununityservice Sentencing and Pre-Parole Corrlitional SUpervisionare
programsimplementedlast year whichdecrease receptions into prison and
increase releases fran prison, respectively. However, crowding in
prison continues to be a critical concern for the state of Oklahoma. In
Augustof 1988 GovernorBellIlDncalled' a special session of the state
legislature to deal with the prison problem. At that time Senate Bill 2
directed the OklahomaJ)epartnElt of Corrections to take immediate
actions by considering plans for the expansfon of mediumand maximum
security bed space at the Oklahomastate Penitentiary at McAlesterand
construction of a min.imunVne:limsencurity prison to be located at
Hinton.
The prison population has nore than doubled over the last ten
years, grc1Ningfran 4300 in 1979 to over 10,500 today. Oklahomahas
respondedto this problem, in part, by exparxlingcapacity. In addition,
Oklahomahas implementedan energencyrelease act (the "cap" law) and
has encouragedthe use of alternatives to incarceration. Nevertheless,
the prison systemtoday has nearly 1400 iInnatesover capacity. Figure 1
(AppendixA) showsprojected crowdingby security level at the ern. of
calerrlar year 1998: 1) urder current policy (i.e., the "cap" law is in
effect); and 2) assuming"cap" were not in effect. ,Figure 2 (Appendix
A) presents iInnatepopulation projections with and without "cap."
Prison population growthhas been a persistent problem. Although
various prograns have been implementedto control growth, the task force
foresees prison population grcMln:Jfor many years to came unless
significant action is taken by the Oklahanalegislature.
capacity expansdon is one option that should be seriously
considered. Because the greatest bed space shortages are and will
Prison site selection TaskForce Final Report
February 13, 1989
Page2
continue to be in maximum am IOOdiumsecurity facilities, am because
they take at least two to three years to build, highest priority should
be given to exparrlirg the higher security levels.
Creation of the Task Force
Senate Bill 2 directed the Oklahorra ~t of Correctionsto
study the expansionof prison facilities at lwt:Al.ester ard Hinton. '!he
Oklahona~partment of Corrections, in order to obtain an inunediateand
unbiased evaluation of the two sites, naned an "external," task force.
'!he Prison site Selection Task Force was established in November1988.
'!he Prison site Selection Task Force was given the charge of
con:iucting a feasibility study for expansion of medimnam maximum
security bed space at the Oklahomastate Penitenticu:y at McAlester am
constnlction of a nri.nilnunVmedimsencurity prison to be lcx:::atedat
Hinton. '!he scope of the task force marrlate was limited to
consideration of: 1) state operated prisons only (in contrast to
privately operated facilities); 2) the cost of facilities; am 3)
financing, to include present value analysis. '!he task force was
directed to look at Hinton am McAlester sites first; however, other
interested conum.mitieswere invited to submit relevant infonnation to
the task force.
'!HERE.'V]Eq. PRCX:::ESS
On November28, 1988, the task force had its organizational meet-ing.
'!he task force agreed to review infonnation to include: geographic
distribution of current facilities am security levels; fiscal am
historical infonnation; site starrlards (ACA,etc.); facility organiza-tional
stnlcture; prison population projections; am other relevant
infonnation provided by the OklahomaDeparbnent of Corrections. In
addition, the task force agreed to hold three site review m:etings.
site ReviewMeetings
'!he first meeting was held on December12, 1988 in Hinton, Oklaho-ma,
while the:secon:i m:eting was held on December14, 1988 in McAlester,
Oklahoma. EaCh of these m:etings was held following a tour of the
proposed prison site am a tour of the town. At each lcx:::ationthe task
force memberslistened to statem:mts fram irrli viduals who supported or
opposedplacem=ntof a prison facility in their c::cmm.mityA.n invitation
was exterxied for anyonewishing to makea written statem:mt to the task
force to do so in care of the OklahomaDepartmentof Corrections.
A third m:eting was held on January 10, 1Q89 at the Oklahoma
Deparbnentof Corrections administration builclinJ in Oklahomacity. '!he
purpose of the third m:eting was to provide an opportunity for other
interested parties to be heard am present supporting infonnation.
Representatives fram Beaver, Cl.1shin:J am Helena were present, am all
expressed interest in having a prison facility lcx:::ated in their
c::cmm.mities. In addition, persons fram Hinton spoke both for am
against their city as the site. Most had not spoken at the December
12th m:eting.
Prison site Selection Task Force Final Report
February 13, 1989
Page 3
SUbcommittee RepOrts
On January 13, 1989 the Prison site Selection Task Force ret to
discuss its fi.rrlirxJs am evaluative criteria am the fonrat am struc-ture
of the final report. At this reetin:j two subcc:mnittees were
created. Each was to prepare a subcc:mnittee report sunurarizing its
firxiID;Js am judging the feasibility of establishing a prison at either
or both locations.
On January 27, 1989 the Prison site Selection Task Force ret to
discuss the subcarmni.ttee reports. '!he fo11owin:] matrix presents the
fi.rrlin:Js of the subcarmni.tteeswith respect to the evaluative criteria.
Copies of the full reports are included in Apperrlix C.
IHYSICAALNDFISCAL-- •.....u<0
.. L3 5000
Noo
.-.
0:: 4000 w>o
(J) w!< 3000 ::E:
Z•.....
u,
0w0::2000
CD ::E:
:::::>
z 1000
O...L..--..J
325337207318
TOTAL
258239257
MAXIMUM
11052526
2578
MEDIUM
820
807
1627
MINIMUM
422 251
673
COMMUNITY
Figure 2
14000-
13500-
13000-
12500-
If
10500-
10000-
9500-
OKLAHOMA DEPARTMENT OF CORRECTIONS TOTAL SYSTEM POPULATION PROJECTIONS WITH AND WITHOUT CAP
PROJECTED
DIFFERENCE BETWEEN
CAP AND NO CAP
RX>4
ACTUAL
TOTAL SYSTEM
POPULATION
--~ XXX>c
~
~
~XXXXXXXXX>c
.,. O:XXXXXXXXXXXXXX>c
>c
XXXXXXXAA.AXXXX>C
.A.xXXX>C
XXXXXXXXXXXXXX>C
X.JC
xx-XY)C
WITHOUT CAP XXXXXXXXXXXXX>C
A.A.XXX>C
Xx..X~
9000.- I I I I I I I I I I I I I I I I I I I I I I I
6/87 6/88 6/89 6/90 6/91 6/92 6/93 6/94 6/95 6/96 6/97 6/98
12/87 12/88 12/89 12/90 12/91 12/92 12/93 12/94 12/95 12/96 12/98 12/98
IR
WITH CAP
Appenlix B
1 the Oklahoma Statutes:
Budgetary Limitation
Full-time-equivalent Employees
Amount
iht
29.0
Payroll, Salaries or Wages, Including Tax-sheltered
Deferment Contracts and Longevity Payments
Authorized by State Statutes $6961495T98
$116,175.00
Professional and Personal Services Contracts $0.00
Purchase of Equipment $i6J49hee
$27,300.00
Expenditure of Federal Funds $0.00
Total Expenditures for Operations 'hUSTUhee
$1,045,365.00
SECTION 13. There will be
SECTION 14. There is hereby appropriated to the Department of
Buman Services from any monies not otherwise appropriated froa the
Speci.l Cash Fund of the State Treasury the sum of Three Bundred
Seventy Thousand Dollars ($370.000.00) or so much thereof as aay be
necessary for youth services programs and shelter ••
SECTION 15. There is hereby appropriated to the Department of
Buman Services from any monies not otherwise appropriated from the
Special cash Fund of the State Treasury the sum of Three Bundred One
Thousand Thirty-four Dollars ($301,034.00) or so much thereof as may
be necessary for capital construction at the juvenile detention
centers in Muskogee and Enid.
SECTION 16. AMENDATORY Section 3 of Enrolled Bouse Bill
No. 1567 of the 2nd Session of the 41st Oklahoma Legislature, is
amended to read as follows:
Section 3. It is the intent ~f the Legislature that the funds
appropriated to the Department of Buman Services in Sections 1 and 2
of Enrolh·d House Bill No. 1567 of the 2nd Session of the 41st
Oklahoma Legislature and Section 14 of this act shall be expended in
the following amounts and categories:
1. Services to Children and Youth $ 48,721,197.00
th3ih38io99
8,681,382.00
2. Oklahoma youth Services Agencies
3. Services to the Mentally Retarded
and Developmentally Disabled
4. Rehabilitative and Visual Services
22,300,652.00
8,721,908.00
5. School for the Blind 3,459,314.00
6. Services for the Deaf and
ENGR. S. B. NO. 2 (3R~ EXTRAORDINARY SESSION) Page 9
Apperrlix c
FHYSlCAL AND FISCAL CDNSIDERATIONS SlJBCXlv1MITI'E REroRr
January 27, 1989
FHYSlCAL CRITERIA
Accessibility
Terrain
Water
Electricity am
gas
SewageTreatment
Time to construct;
Disadvantages
Bondissuance
FHYSlCAL CDNSIDERATIONS
EVAIDATION MATRIX
HINION
Good. Close to I-40
on US-281. The location can
provide enoughdistance
between the highwayard the
site for a security buffer.
Good. Rolling terrain with
the main site located on
the top of a large flat
area. A square mile of
lam has been identified
as being included, all of
whidl can be well utilized
by a prison.
Good. Nine water wells
are on the site whidl may
be developed for use as a
water supply. All reports
irrlicate that there is a
plentiful supply.
Noproblem.
A newsewage lagoon will
be required.
16 to 18 months, A
constnlction conglomerate
is ready to finance am
build a prison for lease to
the state. Upto 8 months
can be saved.
NoneobseIved.
Feasible.
Good. Near US-270 on
existin;J prison
grourxls.
Good. Gently sloping
terrain just south of
the old women'sunit
on the grourxls of OSP.
Good. water is
supplied from the City
of McAlester whidl has
assured us that their
newplant can easily
absorb the expansion.
Noproblem.
A new sewage lagoon
will be required.
24 to 36 months.
Noneobsel:ved.
Feasible.
In surranary, with regard to such factors as accessibility, the
terrain, am utility availabilitity, both sites would meet the
requirements the Department of corrections is likely to have for the
types of prisons considered for these two sites.
FISCAL (X)NSIDERATIONS
See attached treJt¥:) fran stan Provus the state borrl advisor, regard-in1
bond financin1 of prisons.
State of Oklaho ma
EXECUTIVE AND LEGISLATIVE
BOND OVERSIGHT COMMISSIONS
104 State Capitol Building
Oklahoma City, Oklahoma 73105
405/521-2121
Stan Provus
State Bond Advisor
MEMORANDUM
TO: Cliff Sandel, Deputy Director
Administrative Services
Department of Corrections
Stan Provus -Ie f/
State Bond Advisor
~ ~~3k1U'~~~~@
FROM: OlVIS:ON Of ADMINISTRATION
DATE: January 30, 1989
SUBJECT: Bond Financing of Prisons
Bond financing is the preferable funding alternative for new
prisons. Bond financing brings about intergenerational equity in
paying for oapital assets with long useful lives like prisons.
Moreover, it would actually be less expensive for the State to
bond for prisons than pay cash, assuming the cash were available.
Under current market conditions, these savings would total about
$3.1 million dollars on a $30 million dollar prison. Various
aspects of a bonded approach to financing prison(s) are
considered below.
I. Type of Bond
Tax-exempt revenue bonds or Certificates of Participation
Bonds would be secured by lease payments from the Department of
Corrections. Once all lease payments are made, the facility
would revert to State ownership (sometimes ownership can be
transferred at origination). The Department of Corrections would
be required to request annual appropriations to make lease
payments. Because annual lease payments represent annual
operating expenses contingent on appropriations, the financing
would not represent "debt" for constitutional purposes nor be
subject to voter approval.
There is about $33 million of public sale, lease rental bond
debt outstanding in Oklahoma for which the State is responsible.
It is being used to finance both real property and equipment for
a number of State agencies ranging from the Department of Human
Services to the State Finance office. All such issues have been
rated "A" by Moody's, without credit enhancement. A prison issue
could expect a similar rating without credit enhancement.
II. Estimate of Annual Debt Service Cost
Assumptions: - $30 million principal amount
- 20 year term
- "A" rated bond issue
- 7.6% Net Interest Cost under current
conditions
A. Monthly payment: $243,515
B. Annual payment: $2,922,187
This debt service cost estimate is reasonable under current
market conditions. The McAlester Industrial Development
Authority term sheet contemplates an "insured" offering sold
through "competitive bid". The question of who should issue the
bonds is considered below. There are several issues that need to
be considered to establish whether an "insured" offering is
cost-effective and, secondly, whether a competitive versus
negotiated offering makes sense. These issues are
inter-dependent.
Bond insurance is a form of "credit enhancement" or
substitution and simply involves an issuer's purchase of outside
support for a bond issue which substitutes for an issuer's own
credit on a particular bond issue. The credit substitute
provides protection to bondholders, even in the event of issuer
default. The issue is, therefore, assigned a rating reflecting
the insurer's (bank letter of credit, bond insurer, etc.) own
debt rating.
A municipal bond insurance policy is a non-cancellable
guarantee to make timely debt service payments, if the issuer
does not. There are a number of companies providing insurance on
municipal bonds (AMBAC, BIC, MBIA, FGIC). Insured bonds today
account for about 30% of new issue volume.
On an Oklahoma prison issue, bond insurance could be
expected to improve the rating from "A" to "AM" and thereby
permit accessing the market at lower interest rates. An issue
rated "AM" rated issue would likely sell at an NIC rate of 7.3%
versus the 7.6% rate noted above for an "A" rated issue~ Under
current market conditions, if the annual cost of the insurance
premium was less than 30 basis points (100 basis points=l%), an
"insured" approach would be cost-effective. If higher than 30
basis points, it would not be cost-effective. The
cost-effectiveness of bond insurance can only be established once
Page 2
quotes are received from insurers and measured against interest
rate savings under prevailing market conditions (spreads between
A and AAA-rated issues vary) •
If cost-effective, a bond insured issue would likely achieve
the most aggressive pricing though a "competitive" sale.
Generally speaking, an issuer achieves the best rates through
competitive sale on "plain vanilla", general obligation backed
bond issues. Most revenue bonds are sold through "negotiated"
sales, since there is usually more of a "story bond' element to
them and a negotiated sale permits pre-marketing of an issue to
minimize this handicap. Bond insurance acts to eliminate the
"story" element because the bond buyer really looks to the
AAA-rated credit of the insurer. Thus, the question of insured
versus uninsured and competitive versus negotiated sale will rest
with the determination of the cost-effectiveness of bond
insurance near the time of sale.
III. Who should issue the Bonds?
Industrial Development Authorities at both sites have
offered to act as the bond issuer. It should be understood that
both would act as conduits for the financing and assume no risk
on the bond issue(s). The "credit" is the State, regardless of
who issues the bonds. Serious consideration should be given to
issuing any such bonds through the Oklahoma Development Finance
Authority or Capital Improvement Authority, since their bonds
would carry a "double exemption" in contrast to the "single"
exemption available through the local issuing authorities.
"Double" exemption means the bonds are exempt from both State and
federal taxation; single means federal only. A double-exempt
bond sold primarily to Oklahoma buyers would likely be priced
about 8-10 basis points lower. This would lower annual debt
service by $22,000 per year or save $441,000 over the life of the
issue (present value savings of $274,000 and $188,000 at 5% and
10% discount rates respectively).
IV. Cash Versus Bonding Cost Effectiveness
Perhaps the economist's most often quoted dictum is: "There
is no such thing as a free lunch." The cost of a resource, State
appropriations in this instance to pay cash for a prison, is
therefore, the value of that resource in its best alternative
use, or more broadly, the cost of any decision is the value of
the best alternative opportunity thereby forsaken. This
definition of cost, known as the opportunity cost doctrine, is
probably the economist's major contribution to the practice of
decision-making.
Keeping this principal in mind, the following analysis
demonstrates why it would be cheaper to bond for a prison than
pay cash. The difference or spread between taxable and
Page 3
tax-exempt interest rates drives this analysis. Under current
market conditions, a prison bond could access the tax-exempt
market at about 7.6% (NIC, single-exempt). On the other hand,
the State can invest funds in a highly rated guaranteed
investment contract (GIC) and access a 9.1% taxable rate. This
means the State could invest an amount of money in an escrow at
9.1% and use the escrow to pay principal and interest on a 7.6%
tax-exempt bond. Since the GIC escrow pays interest at a higher
rate than the bond, only $26,873,000 would need to be invested to
meet the monthly debt service payments of $243,515 on the $30
million bond. This would save the State $3,126,000 in current
dollars.
Thus, a bonding approach is more cost-effective than paying
cash, assuming the cash is available. The "best use" of State
funds is this investment approach to support a bond issue or use
of the "cash" for alternative uses such as building up the rainy
day fund. There are some restrictions in the Tax Code that would
limit too direct a relationship between an escrow fund
capitalized with State cash and a bond issue.
SOP:pks
cc: Dr. Don Udell
College of Education
Page 4
SOCIAL AND AIMNISTRATIVE OONSIDERATIONS SUBCX:MvU'lTEE REroRr
January 27, 1989
'lhis subconunitteelookedbeyorrljust the economiciIrpact of estab-lishirxJ
a prison in a cammmity. We looked at the social structure:
what structures mist be there to ensure success, am what changes are
likely to ocx::uras a result of the presence of a large institution. '!he
items we considered included: available labor force, social cl.inate,
social i.Irpact, support services, ani administrative considerations.
Available labor Force
'!he available labor force includes both skilled am unskilled
labor. In Iookinq at the available labor force in the cammmities, we
fim that McAlesteris probably slightly better off than Hinton regani-irq
size of the workforce am perhaps even correctional-related skills
represented. However,there are substantial mnnbers of ready and
willirq workers in both areas.
Social Clinate
Social clinate includes political am citizen attitudes am will.
'!here wasaburrlanttestiloony at both public hearings that both McAlester
am Hinton political leaders support;the establishment of a prison in
their area. In regard to citizen will, samecitizens in Hinton have
certainly voiced their opp::sition, while no opposition to the proposed
expansionwasexpressed fromanyonein McAlester. Withinthe context of
citizen am political will, the subcanunitteemist, identify McAlesteras
apparently nore responsive am more receptive to the proposition than
Hinton.
Social Impact
Social inpact refers to the ability of the canununityto assimilate
corrections personnel, their families, am irnnate families, into the
canununity. OUr feelirq is that the canununityof McAlester,beirq prison
sensitive am experiencedalready, wouldmorelikely assimilate the new
prison families into the canununitywith greater ease than the cxnnmunity
of Hinton. Werealize that Hinton will take necessary steps to make
staff am visitors as welcomeas possible; however,wealso realize that
in a cxnnmunity of the size of Hintonthere maybe sameproblems,partic-ularly
aIOO~those people in the canununitythat have consistently
opposedthe prison. Weare troubled by this, but wedo not consider it
a major barrier.
'!he subcanunitteefelt that the ability of the respective local
school systemsto assimilate the y~ of the correctional families
wasprobably equal.
SUpportServices
Support services include supp::>rttype businesses am service
enterprises. Eachcanununitycurrently has these services in place am
looks fo:t:WcUto'd expansion. Again, McAlester is slightly ahead of
Hinton: however,wedo not see this as a major selection factor.
Administrative Considerations
'!he subcaImnitteelooked at administrative considerations within the
context of the Depart:nEltof Corrections' control. '!he subcommitteedid
not see any difference in the two locales, with one exception. Regard-irg
supply am storage capabilities, M::Alester has a slight edge over
Hinton. '!his difference is not substantial enoughto affect the selec-tion
decision.
SUmrrary
In SUlTIllm'Y, in M:Alester this subcommittee sees a mature, prison
seasoned cannnunitythat is seeking expansion. In Hinton, we see a group
of people whospoke persuasively ani enthusiastically for lcx:::ationof a
prison in their canm.mity. Wehave no reason to believe that is not the
case with manymanypeople in Hinton, but as wein:licated before, weare
just a bit uncertain as to the scale of support.